I’d like to thank the Lithuanian Presidency of the EU for inviting me to speak at this Informal ECOFIN meeting on such an important topic for the EU and the global economy: the fight against tax fraud and evasion.

Vast amounts of money are kept off-shore and go untaxed. Countries cannot afford to lose these tax revenues. The more we do to combat tax fraud and evasion, the more resources we will have to finance growth-enhancing public investment, restore the health of public finances, and put the euro area economy back on a sustained and long-term recovery.

Fighting against tax fraud and evasion is also a question of trust. Ensuring that wealthy individuals pay their fair share of tax and preventing double non-taxation of multinational enterprises is essential to restore public trust in governments. Taxation lies at the heart of the social contract and constitutes a powerful instrument to reduce inequalities.

Base Erosion and Profit Shifting (BEPS)

The OECD has been working in conjunction with the G20 to tackle double non-taxation of corporate profits through our Action Plan on Base Erosion and Profit Shifting, or BEPS. This is at the very centre of the trust agenda and vital for the strong functioning of the global economy.

The Action Plan sets forth 15 ambitious actions that will result in the most fundamental change to the international tax rules since the 1920s!

The Plan will be rolled out over the coming two years and it will allow countries to draw up the co-ordinated, comprehensive and transparent standards that will ensure multinationals pay their fair share of taxes. The Plan involves some of the following key actions:

First, international tax rules will be developed to address the gaps between different countries’ tax systems, while still respecting the sovereignty of each country to design its own rules.

Second, the existing rules on tax treaties and transfer pricing will be revisited to fix their deficiencies. This will ensure that profits are taxed in the countries where the economic activities that generate them are carried out.

Third, more transparency will be established, including through a “country-by-country” reporting by companies to tax administrations on their worldwide allocation of profits. This will be complemented by more transparency between governments, with the need for countries to disclose tax rulings and other tax benefits to their partners.

Going forward, we will carry out a comprehensive analysis of the economic impact of BEPS, including its effects on taxpayers’ behaviour and on public finances, and the macroeconomic implications of BEPS, including international spill-overs.

Finally, to ensure that the Actions can be implemented faster, a multilateral instrument will be developed for countries that may want to amend the totality of their existing network of bilateral treaties at once, rather than proceed treaty by treaty.

These changes will require leadership by governments. Countries, including many of you here today, are very supportive of our work on BEPS. I am confident that progress will be made.

The OECD created the legal framework, developed the technical standards, and provided the guidance and training to make automatic exchange work worldwide. On a global scale, the 2009 G20 Leaders’ declaration to end the era of banking secrecy was a significant breakthrough in putting this work into action. It resulted in four key outcomes:

First, countries from around the world agreed to meet the standard to exchange information on request, including information on bank accounts;

Second, the Global Forum on Exchange of Information and Transparency for Tax Purposes was restructured to include peer reviews to monitor implementation;

Third, efforts are now on-going to enhance exchange of tax information: 120 jurisdictions are exchanging tax information on request, based on more than 1100 agreements signed in the last few years. Four years ago, there were only 40. We are pleased with these developments, but there is no room for complacency;

Today, more than 60 countries have signed the Convention or have committed to do so, including all members of the G20, most OECD member countries and most EU member countries, including, I note, Lithuania who signed earlier this year.

I am particularly impressed by the wide range of other countries that have signed the Convention. They involve a broad geographic representation, such as the most recent signatory, China, developing countries from all latitudes and offshore financial centres.

Moving towards a higher standard

A single, more ambitious global standard in this area, rather than a proliferation of different and inconsistent ones, is crucial to maximise compliance benefits for residence countries and reduce costs for financial institutions.

The recent endorsement of a global standard for automatic exchange of tax information comes as a result of a period of intense activity in 2013, both within and outside Europe. I will mention a few highlights:

In April, five European countries announced their intention to exchange FATCA (Foreign Account Tax Compliance Act) -type information with each other and with the United States. This approach was subsequently joined by other countries, both in Europe and beyond;

In May, the European Council called for priority to be given to automatic exchange and welcomed the on-going efforts made in the G8, the G20 and the OECD to develop a global standard;

Last June, in Loch Erne, I presented a report to the G8 leaders on how to deliver an effective system for automatic exchange of information in the multilateral context and the G8 leaders resolved to establish automatic exchange as the new global standard;

Also last June, the European Commission adopted a legislative proposal to extend the Mutual Assistance Directive to dividends, capital gains, account balances, among others;

And in July, the G20 Finance Ministers endorsed a new, single, global standard for automatic exchange of tax information and mandated the OECD to complete it by 2014. This was further endorsed by G20 Leaders, including the President of the European Commission and the President of the European Council, at the G20 Summit in Saint Petersburg last week.

Putting words into action

This strong political leadership has provided the momentum to move closer to a single global standard. It is now time to roll up our sleeves and get the technical work done!

To ensure effective automatic exchange we are focusing on three main components. First, common reporting and due diligence rules; second, common information exchange procedures supported by common or compatible IT systems and; third, a legal basis for the exchange.

The good news is that we are well advanced in all three areas! We are developing the model operating documents and an operational platform to allow for swift implementation of automatic exchange on a secure and cost effective basis. And the legal basis for the new global standard already exists. This includes bilateral treaties based on the OECD Model Convention and the Multilateral Convention itself that provides the ideal legal instrument to swiftly implement the new global standard.

Regarding implementation, the G20 has already mandated the Global Forum to monitor and review the implementation of the standard. Along with the World Bank, we will also seek to help developing countries identify needs for technical assistance and capacity building.

Our work to develop a new, single global standard for automatic exchange of tax information will be presented to the G20 by February 2014 and the technical modalities of effective automatic exchange will be finalised by mid-2014.

Ministers, Governors, Ladies and Gentlemen,

The EU’s support has been pivotal in building the momentum towards a new single global standard for automatic exchange of tax information.

Indeed, the EU’s input and support for the on-going work and its experience of existing reporting and data handling systems is invaluable to the development of the single standard – no need to reinvent the wheel!

The challenge now is to put our commitments into action and implement a truly global standard for an increasingly borderless world. I am confident that we can do this together, as we deepen our longstanding partnership and collaborative work.